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5 Ways to Improve Your Company’s Accounts Receivable Process

 Maintaining a general ledger is one of the most tedious tasks that companies face daily. Managing a venture’s cash flow can be tough, more so if you still rely on manual or outdated systems for data-heavy accounting tasks such as balancing your checkbooks.

One form of cash flow that should be factored into your modernization efforts is your accounts receivable (A/R) stream. Simply put, your accounts receivable represents the amount that customers owe for your services or products. Essentially, A/R is included in your ledger when you let a buyer purchase your goods on credit. The amount of money your customers owe is usually collected within a few weeks, after which it will become an asset.

Revamping your A/R process can prevent the waste of capital, heighten liquidity, and reduce overall debt. On the other hand, retaining an unfavorable A/R processing system could make you vulnerable to bad credit management, improper payments, and other financial missteps that could snowball from there. That said, here are some ways you can streamline your A/R procedures along with the overall state of your company’s financial management.

Reassess Your Tech Inventory

If you feel as though your current accounting system is bringing you more headaches than solutions, it may be time to invest in new technologies to manage your company’s funds. For one, an efficient accounts receivable monitoring system will help you gain visibility over your data and automate laborious number-crunching and recording tasks. It would be ideal to invest in a solution that is highly compatible with your point-of-sale (POS) systems to ensure the real-time syncing of information.

Moreover, such systems may have the capacity to generate comprehensive reports on cash flow, current balances, and profit and loss (P&L) data to give you an overview of due payments and transaction records. You should also opt for a centralized A/R system to make audits less disjointed and ensure the continuous issuance of accurate invoices. But beyond efficiency, your account management system must be secure enough to prevent unlawful breaches of company and customer account data.

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Practice Proactive Billing and Invoicing

Some business owners may be hesitant to send out payment terms or have no sense of urgency with payments. The truth is, having a timely dialogue on billing is a practical move that will benefit both you and your customer. It’s better to set expectations outright than deal with consistently overdue payments down the line.

It may help to automate your billing and invoicing processes to ensure that payment terms, deadlines, and other pertinent information are properly communicated as early as possible. Additionally, it may be beneficial to have a system that can intuitively detect accounts that are at high risk of paying past due. For one, you can set up an easily accessible customer portal to make the payment process easier on both ends.

Take Care of Your Customers’ Data

Discrepancies in invoices and mailing data often result in delayed receipts, which can lead to further delays in terms of payments. As mentioned earlier, a centralized system allows your accounting staff to keep track of data such as balances and mailing addresses without being limited by disjointed silos.

Apart from heightened visibility, a unified system can help you address changes quickly and prevent inaccuracies in data entry from affecting the smooth flow of processes. As such, it’s best to implement a system that makes regular assessments to detect and apply changes in payment terms, credit limits, and discounts.

Implement Reasonable Credit Approval Terms

While it’s fine to consistently extend credit to your customers, you still need to be firm with them to prevent bad credit habits from negatively impacting your company. If you haven’t done so yet, review your firm’s credit approval procedure and check if there’s enough clarity in the application process, credit limit policies, and terms for holding accounts.

Make sure to regularly review these terms and instructions to ensure sufficient understanding between you and your customer. Of course, it would help to have an account management system that can automate approval and application steps to simplify the whole process.

Explore Options for Payment Plans and Discounts

One way to encourage customers to pay early or on time is by having discounts and promotions in place. For instance, you can implement an “early payment” promo that will apply a discount to your customer’s owed amount if they pay within a week instead of a month. These types of campaigns can help you boost cash flow, but you may want to seek the input of banking or industry professionals first before implementing such discounts.

On the other hand, you can apply similar campaigns to help ensure that past-due customers will pay up. If a client tells you that they are experiencing difficulties in cash flow that prevent them from paying on schedule, you can make their extension requests more manageable by implementing a payment plan. How the plan will play out depends on the terms that you and your customer have agreed upon, but it would be ideal to make their subsequent purchases cash on delivery (COD) until they have fully paid their dues.

And as previously mentioned, it would help to have a financial management system that can automatically apply such discounts and payment plans without causing much of a disruption to other financial and operational tasks.

Smoother Ways to Manage Your Cash Flow

The potential inability of vendors to pay what they owe can bring a lot of financial headaches that are detrimental to your venture. Still, it’s possible to prevent instances like this from negatively affecting the strides of your business. With the right tech and knowledge of best practices, you can easily balance your books, maintain a stable cash flow, and stay on track toward industry survivability and all-encompassing growth.

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